23 June 2021

EPC: SWIFT – latest developments in cross border payments

SWIFT is fundamentally transforming payments and securities processing to help our customers navigate the complex challenges they will face today and in the future... Improving data quality with ISO 20022 plays a central role in achieving this vision.

SWIFT (Society for Worldwide Interbank Financial Telecommunication), one of the largest financial messaging systems in the world’s international payment network is constantly working to improve cross border payments. We interviewed Harry Newman, Head of Banking Strategy at SWIFT to know more about the latest initiatives across the cross-border landscape.

Could you briefly describe SWIFT’s purpose and core activities.

SWIFT is a global member-owned cooperative and the world’s leading provider of secure financial messaging services. We were established to find a better way for the global financial community to move value – a reliable, safe and secure approach that the international financial community can trust, completely. 

Our messaging services connects 11,000 institutions across more than 200 countries and territories. We relentlessly pursue operational excellence and continuously evolve our platform in line with our vision for instant, frictionless payments and more transparent securities transactions.  

Headquartered in Belgium, SWIFT’s international governance and oversight reinforce the neutral, global character of its cooperative structure.   

What are the main initiatives currently underway or planned within SWIFT to enhance international payments? Can you briefly tell us more about these initiatives? 

SWIFT is fundamentally transforming payments and securities processing to help our customers navigate the complex challenges they will face today and in the future.
 

Over the next two years and beyond, we will deliver on an exciting strategic roadmap for and with our global community that will expand SWIFT capabilities beyond financial messaging to provide a platform for comprehensive transaction management services.

Improving data quality with ISO 20022 plays a central role in achieving this vision. The platform will provide a set of optional common transaction processing services, such as pre-validation of essential data, sanctions screening, fraud detection, data analytics and transaction tracking – mutualising capabilities that today are typically provided, and invested in, by each financial institution individually. By bringing together data and common services, we aim to significantly improve end-to-end efficiency and reduce total costs, while bringing new business value to end customers.  

SWIFT has announced a migration to ISO 20022 messages for cross-border payments and cash reporting starting from the end of 2022. What are the main drivers, targets, milestones and current status of this project? 

SWIFT’s enhanced approach to ISO 20022 adoption will enable the community to better reap the benefits of rich data. Our vision aims for instant and frictionless transactions where rich ISO 20022 data is the foundation. The roadmap comprises three phases:

• Now to November 2022: The existing message type (MT) messaging remains standard for cross-border payments. Financial institutions continue to invest in training staff for ISO 20022 market practice and in enabling channels, payment processing and screening systems to support the ISO 20022 dataset.
• From November 2022 to November 2025: SWIFT transaction management services are introduced, supporting the new dataset for ISO 20022 payments and reporting, and enabling co-existence with financial institutions that choose to stay on MT messaging.
• November 2025 onwards: The main payment message categories MT1xx, MT2xx and MT9xx are progressively decommissioned.

Across the financial industry, many market infrastructures are already transitioning from MT or various other message formats to the ISO 20022 standard. The transformation is well underway and ISO 20022 has already been adopted in more than 70 countries.  

Generally speaking, can you tell us more about SWIFT’s contribution to European payment harmonisation, integration and development?

SWIFT’s has unrivalled expertise in managing complex, large-scale market migrations and a long track-record as a trusted partner for the European financial industry. We continue to play a pivotal role in industry transformation, including supporting TARGET2 and EURO1/STEP1. For pan-European instant payments, SWIFTNet Instant connects customers to both TARGET Instant Payment Settlement (TIPS) and Real Time 1 (RT1). SWIFT and the Payments Market Practice Group (PMPG) are also leading cross-industry work to ensure the harmonisation of the ISO 20022 standard.   

Finally, a broader question: what do you see as the main trends behind the evolution of payments in Europe and globally until 2030 and the corresponding impact on SWIFT’s role and activities?

The global payments business is undergoing unprecedented change. It is an exciting and dynamic period.

• Competition is intensifying across the value chain. New entrants and new models have emerged with improved products and client experience
• Upstream markets are being disrupted. Most payments or securities transactions follow from a broader trade or transaction elsewhere. These markets are experiencing huge change with growing digitisation and e-commerce.
• Regulation continues to command resources and is front and centre for many financial institutions.
• The demand for rich data and digitisation is growing. It is key to both reducing friction and enabling better services.
• Technology continues to shape the future. Cloud, Application Programming Interfaces (

• ) and other technologies are offering new ways of working and helping to create new ecosystems.
• Cybercrime remains a growing threat and will continue to evolve even as institutions improve their defences.

The pandemic has significantly accelerated some of these trends and the landscape is changing very fast. SWIFT will continue to work on solutions that mutualise the cost and effort of change for the industry, so the benefits can be unlocked. 

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